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Centre for Policy Development urges companies to tell shareholders of climate change risks

Australian shareholders should be told of climate risk to profits, says thinktank
Centre for Policy Development urges companies to adopt standardised analysis of climate’s impact on business, Guardian, Gareth Hutchens, 29 Nov 17, Australian companies need to start developing sophisticated scenario-based analyses of climate risks, and incorporating them into their business outlooks so shareholders know how climate change will affect profitability, a thinktank has said.

However, the Centre for Policy Development (CPD) said companies needed to do so in a standardised way, so investors and regulators were able to easily understand economy-wide risks to whole industries.

The progressive thinktank urged Australia’s biggest businesses to use the Paris climate agreement as the centrepiece for their scenario planning, saying it provided a credible, long-term anchor for policies that limit global warming to well below 2C.

The groups has released a discussion paper, called “Climate horizons: next steps for scenario analysis in Australia”, explaining the best way to do so.

He said Apra intended to start running stress tests of the financial system to see if it would survive various climate shocks, and all Apra-regulated entities would need to adapt to the coming regulatory changes. “I think the days of viewing climate change within a purely ethical, environmental or long-term frame have passed,” Summerhayes said.

The CPD’s new discussion paper suggested how Australian businesses could be consistent with the country’s international climate commitments under the Paris agreement and with the leading international framework for robust climate disclosures, the Financial Stability Board’s taskforce on climate-related financial disclosures (TCFD).

It said businesses ought to try to develop a standardised approach to scenario-based analysis, and that all scenario analyses should include:

A scenario that is genuinely consistent with Paris targets. It should therefore incorporate a high probability of limiting warming to below 2C, and towards 1.5C

A scenario that includes the physical impacts of climate change, not just transition risks

Engage with the most relevant sectoral or regional scenarios and resources available

Be transparent about assumptions and parameters used to develop the scenarios, in line with the TCFD disclosure framework

Show evidence that management is overhauling their business models in response to scenario analysis results…….